Executive Summary / Key Takeaways

• Bloomin' Brands, a multi-brand restaurant operator, is undergoing a strategic transformation focused on simplifying operations, enhancing the guest experience, and revitalizing its core Outback Steakhouse brand to counter recent underperformance and market share loss in a challenging casual dining environment.
• Key initiatives include significant menu simplification across brands, a shift from complex limited-time offers to everyday value propositions like the Outback Aussie 3 Course, and leveraging technology like the Ziosk rollout for improved efficiency and real-time guest feedback.
• Financial performance in Q1 2025 showed U.S. comparable sales growth of 0.5% but traffic declines, resulting in underperformance relative to the industry, driven by a cautious consumer and inflationary pressures on costs; adjusted EPS of $0.59 was within guidance.
• The company is strategically reallocating capital, slowing new unit growth starting in 2026 to prioritize investment in the existing asset base through remodels and maintenance, aiming for improved guest experience and sustainable traffic growth, while also focusing on debt reduction post the Brazil divestiture.
• Outlook for Q2 and Full Year 2025 reflects continued caution regarding the macro environment and consumer spending, with guidance anticipating negative U.S. comparable sales and earnings pressure, highlighting the early stages and inherent risks of the multiyear turnaround effort.

A Portfolio Undergoing Transformation

Bloomin' Brands, Inc. (NASDAQ: BLMN) stands as a significant player in the casual, upscale casual, and fine dining landscape, operating a diverse portfolio that includes well-known names like Outback Steakhouse, Carrabba's Italian Grill, Bonefish Grill, and Fleming's Prime Steakhouse & Wine Bar. With a history rooted in a culture focused on its people, the company has grown to encompass a wide footprint across the U.S. and internationally, leveraging both company-owned and franchised models. However, recent performance has highlighted the need for strategic evolution, particularly in the face of a challenging macro environment and shifting consumer behaviors.

The company's strategy is currently centered on three core priorities: simplifying the agenda, consistently delivering a great guest experience, and executing a focused turnaround at its largest brand, Outback Steakhouse. This strategic pivot acknowledges recent underperformance relative to the broader casual dining industry and a loss of market share, signaling a commitment to operational excellence and value proposition enhancement as the path forward.

Central to this strategic refresh is the role of technology and operational efficiency. The recent successful rollout of Ziosk tablets across Outback Steakhouse restaurants exemplifies this focus. This technology is not merely a payment tool; it's designed to enhance the guest experience and operational flow. Management highlights that over 85% of guests are utilizing the tablets for payment, contributing to an average table turn increase of approximately five minutes. Beyond payment, Ziosk provides invaluable real-time guest feedback by store and by shift, which, combined with AI tools, offers managing partners actionable insights to address specific areas efficiently. This technological integration is aimed at improving both the guest experience and throughputs, supporting the broader goal of consistent execution.

The competitive landscape for Bloomin' Brands is dynamic and includes formidable rivals across its segments. In casual dining, particularly in the steakhouse category, the company competes directly with players like Texas Roadhouse (TXRH) and Darden Restaurants (DRI), which operates LongHorn Steakhouse. Other casual dining competitors include Brinker International (EAT) with Chili's, and The Cheesecake Factory (CAKE) in the upscale casual space.

Comparing key financial metrics based on recent TTM data reveals some differences in performance. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, BLMN's recent underperformance in comparable sales and traffic relative to the industry suggests a loss of share to some rivals. BLMN's TTM Gross Profit Margin stands at approximately 13.7%, Operating Profit Margin at 3.2%, and Net Profit Margin is negative at -0.05%. In contrast, TXRH, a direct steakhouse competitor, shows a TTM Gross Profit Margin of around 18%, Operating Profit Margin of 10%, and Net Profit Margin of 8%. DRI, with its diverse portfolio including LongHorn, reports a TTM Gross Profit Margin of about 21%, Operating Profit Margin of 12%, and Net Profit Margin of 9%. These comparisons indicate that BLMN has faced greater pressure on profitability margins compared to some key competitors, potentially stemming from higher operating costs, labor inflation, and commodity pressures noted in recent results.

BLMN's strategic positioning leverages its portfolio diversity, offering distinct dining experiences across different price points and cuisines. Its international franchising model, particularly post the Brazil sale, provides a steady royalty stream and reduces earnings volatility compared to company-owned international operations. However, the company acknowledges being priced higher than some competitors, impacting its value proposition in the current cautious consumer environment. Operational efficiencies, while being addressed through initiatives like menu simplification and technology adoption (like Ziosk), appear to lag some peers who have invested heavily in streamlined supply chains and digital tools for faster service. The competitive environment is also characterized by aggressive promotional activity, requiring BLMN to focus on abundant everyday value to drive traffic without resorting to deep discounting that could further pressure margins.

Strategic Shifts and Operational Refinements

A significant strategic move completed on December 30, 2024, was the sale of a 67% ownership interest in the Brazil business to an affiliate of Vinci Partners. This transaction marked a strategic shift towards a primarily franchised model for international operations, aiming to simplify the business and focus on domestic priorities. Bloomin' Brands retained a 33% interest in the Brazil franchisee, accounted for using the equity method. The first installment of the purchase price ($103.9 million net of taxes) was received and applied to the revolving credit facility in Q1 2025, with the second installment due in December 2025. This divestiture de-risks the business model, with over 30% of total restaurants now operating under franchise agreements, providing a more stable royalty revenue stream.

Domestically, the focus is squarely on operational execution and enhancing the guest experience. Menu simplification is a key initiative across all brands. Outback's April menu saw a 10% reduction in items, with a target of approximately 15% by the end of 2025. Carrabba's May menu will have 10% fewer items, Bonefish Grill's April menu saw a 20% reduction with quality enhancements, and Fleming's summer menu will also reduce items by about 10%. This streamlining targets items with low sales mix, poor satisfaction scores, or those that create operational complexity, aiming for more consistent execution and potentially lower back-of-house labor costs.

The company is also moving away from complex seasonal LTOs at Outback, which required frequent training, towards an abundant everyday value offer like the Aussie 3 Course. This offer leverages core menu items and is expected to drive stronger traffic lift in the latter half of the year. Management believes this approach builds brand trust and encourages frequency of visitation among loyal guests, while also allowing for guest trade-up to higher-priced tiers within the offer.

Investment in the existing asset base is gaining prominence in the capital allocation strategy. Starting in 2026, the company plans to slow down its new unit pipeline, particularly for Outback, shifting focus to maintenance and remodels of existing restaurants. A repair and maintenance survey is underway, expected to be completed by the end of Q2 2025, to inform the strategy for refreshes and remodels. The goal is to remodel approximately 50% of the U.S. stores over the next two to three years, using lower-spend, higher-impact scopes that are expected to yield better returns by driving improved traffic and guest satisfaction. This represents a strategic pivot to strengthen the core domestic business before aggressive expansion.

Leadership changes have also been part of the strategic refresh, with Mike Spanos assuming the CEO role and key appointments like Pat Hafner as President of Outback Steakhouse and Kelia Bazile as President of Carrabba's, emphasizing an operation-centric mindset from the top.

Financial Performance and Outlook

Bloomin' Brands' recent financial results reflect the challenging operating environment and the early stages of its strategic initiatives. For the thirteen weeks ended March 30, 2025 (Q1 2025), total revenues from continuing operations were $1.05 billion, a decrease of 1.8% compared to the same period in 2024. U.S. comparable restaurant sales saw a modest increase of 0.5%, but this was accompanied by a traffic decline of 3.9%. This performance lagged the broader casual dining industry, indicating market share pressure.

Profitability metrics also showed pressure. Adjusted operating margin for Q1 2025 was 6.1%, down from 7.8% in Q1 2024. Restaurant-level operating margin declined by 160 basis points year-over-year. Key drivers included increased food and beverage costs (up as a percentage of sales due to unfavorable mix and commodity inflation), higher labor costs (up as a percentage of sales due to wage rate inflation), and increased other restaurant operating expenses (up as a percentage of sales due to inflation). General and administrative expenses also increased, partly due to severance and foreign currency contract costs. Adjusted diluted earnings per share for Q1 2025 was $0.59, which fell within the company's guidance range of $0.55 to $0.60, but represented a decrease from $0.64 in Q1 2024.

Liquidity remains adequate, with $57.7 million in cash and cash equivalents as of March 30, 2025, and $583.7 million available under the revolving credit facility. The company remains in compliance with its debt covenants. Total debt net of cash was $860 million at the end of Q1 2025, resulting in a net debt to adjusted EBITDA leverage of 2.5 times and lease adjusted net leverage of 4.0 times.

Reducing lease adjusted net leverage to below 3.0 times is a stated priority, supported by cash flow generation and Brazil sale proceeds.

The outlook for the remainder of 2025 reflects continued caution. The company expects to be at the low end of its full year adjusted diluted earnings per share guidance range of $1.20 to $1.40. This guidance is provided before any potential additional investments in quality, value, and execution as part of the Outback turnaround. Key factors influencing this outlook include the unexpected extinguishment of the Brazil tax benefit, which is now expected to result in a negative $5 million to $7 million impact on 2025 earnings from the equity method investment. Additionally, the outlook assumes a continuation of the choppy macro environment and cautious consumer behavior, which may necessitate fluid value offerings and potentially pressure average check due to mix shifts. Full year commodity inflation is projected between 2.5% and 3.5%, driven by beef, and labor inflation is expected between 4% and 5%. The full year tax rate is anticipated to be near 0% due to FICA tip credits. Capital expenditures are expected to be on the low end of the $190 million to $210 million range.

For the second quarter of 2025, the company forecasts U.S. comparable restaurant sales between negative 250 basis points and negative 150 basis points, and adjusted diluted earnings per share between $0.22 and $0.27. This guidance assumes similar softness for Mother's Day and Father's Day as seen during Valentine's Day and Easter.

Risks and Challenges

Despite the strategic initiatives underway, Bloomin' Brands faces several risks and challenges that could impact its performance and the investment thesis. The choppy macro environment and cautious consumer spending remain significant headwinds, potentially suppressing traffic and requiring ongoing value investments that could pressure margins. Inflationary pressures on commodities, particularly beef, and labor costs continue to pose challenges to profitability, although the company is working on mitigation strategies like supply chain initiatives and operational efficiencies.

Execution risk is inherent in the multiyear turnaround plan for Outback Steakhouse. Successfully implementing menu simplification, enhancing food quality specifications, refining the service model, and effectively communicating the value proposition requires consistent execution across a large restaurant base. The competitive landscape is intense, with rivals actively promoting value and investing in operational efficiencies and digital capabilities. BLMN must effectively differentiate and execute to regain market share.

External factors like the potential impact of tariffs on commodity costs (estimated 20-40 basis points risk to margins not included in guidance) and foreign currency fluctuations related to the Brazil installment receivable also present risks. The unexpected loss of the Brazil tax benefit highlights the potential for unforeseen impacts from international operations, even under a franchised model.

Conclusion

Bloomin' Brands is at a pivotal juncture, actively implementing a strategic transformation to address recent underperformance and capitalize on the long-term potential of its diverse restaurant portfolio. The core investment thesis hinges on the successful execution of the Outback Steakhouse turnaround, driven by operational simplification, enhanced guest experience, and a compelling value proposition. Initiatives like the Ziosk rollout, menu streamlining, and a shift to everyday value offers are foundational elements of this plan, supported by a strategic reallocation of capital towards strengthening the existing asset base through remodels.

While recent financial results and near-term guidance reflect the ongoing challenges of a cautious consumer and inflationary environment, the company's focus on cost management, debt reduction, and investing in core operational capabilities provides a pathway towards potential future growth and improved profitability. The Brazil divestiture simplifies the business structure, allowing greater focus on the domestic market. Investors should closely monitor the progress of the Outback turnaround initiatives, the impact of value strategies on traffic and margins, the realization of cost savings, and the effectiveness of asset investments as key indicators of the company's ability to regain market share and deliver sustainable long-term value in a competitive industry.